The rate of output price growth in Australia’s construction sector reaccelerated in the June quarter as improving housing demand enabled builders in the detached house sector to regain a degree of pricing power, new data suggests.

The Australian Burau of Statistics has released the June quarter edition of its Producer Price Index report.

In terms of construction, the report found that the overall rate of output price growth picked up from low levels that were seen in the March quarter.

Overall, it found that:

  • In building construction, the quarterly rate of output price escalation reaccelerated from 0.3 percent in the March quarter to a more normal rate of 0.7 percent in the June quarter.
  • In civil and heavy engineering construction, price growth increased from 0.3 percent in the March quarter to 0.8 percent in the June quarter.

Across calendar 2024/25, output prices increased by 2.2 percent in building construction and by 1.9 percent in civil construction.

Over the five years since June 2020, output prices have increased by 25 percent and 19 percent across building and civil construction respectively.

In terms of building construction, the latest result represents a return to normal levels of price growth.

This followed an abnormally low reading in the March quarter during which prices for detached home building were weighed down by discounting which had occured amid weak market conditions in New South Wales and Victoria.

In the June quarter, improving conditions saw prices rise by a modest 0.3 percent as builders regained the ability to pass on cost increases.

Meanwhile, stronger quarterly output price growth of 0.8 percent and 0.9 percent was observed in other residential construction (units, townhouses, apartments etc.) and commercial/non-residential construction.

This reflects ongoing but steady levels of quarterly price growth in these sectors.

According to the ABS, cost pressures in these sectors include:

  • higher labour costs, which have arisen from annual wage increases for many employees working on larger construction projects combined with ongoing high demand for electrical services, formwork and finishing trades; and
  • ongoing competition for resources such as labour and concrete which are arising out of the boom in public infrastructure investment.

 

Building construction output prices, Australia

Turning to civil and heavy engineering construction, the rate of output price escalation in road and bridge construction increased from 0.3 percent in the March quarter to 0.8 percent in the June quarter.

Meanwhile, quarterly price growth in other civil and heavy engineering construction increased from 0.4 percent in March to 0.8 percent in June.

This represents a relatively normal rate of price acceleration by recent historic standards.

The cost increases reflected higher wages along with higher manufacturing costs including cement, manufacturing wages, energy and facility costs.

 

Civil & heavy engineering output prices, Australia

 

Material price growth is back on the rise

Meanwhile the data also indicated that material price growth is back on the rise.

According to the report, the overall rate of price escalation for inputs which are used in detached house construction increased from -0.1 percent in the March quarter to 0.9 percent in the June quarter.

 

Housing construction material price movements, Australia

This represents the first time that quarterly material price growth has increased by more than 0.5 percent since June 2023.

The rise was driven by higher costs for raw materials such as timber, copper and aluminium as well as annual price increases in plaster products.

 

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